Order 2013

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UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

O n the Thirtieth day of August , 2013

United Airlines, Inc

. Docket OST 201 3

- 000 4

Ser ved August 30, 2013

Violations of 14 CFR Parts 234

, 250

, 259

, and

374 , and 49 U.S.C. § § 4170 8

, 41712 , and 41721

CONSENT ORDER

This consent order concerns the failure of United Airlines, Inc.

, ( United ) to timely process consumer refund requests, as required by the Consumer Credit Protection Act

and Regulation Z of the Board of Governors of the Federal Reserve System, 15 U.S.C. §§ 1601

- 1693r and 12 CFR Part 226 (Regulation Z), and the related implement ing requirement in 14 CFR Part 374

. This consent order also addresses Uni ted’s failure to

file accurate mishandled

- baggage reports as required by 14 CFR 234.6 and oversales data as required by 14 CFR 250.10 , as well as United’s failure to file in a timely manner

reports of incidents involvin g animals during air transport as required by 14 CFR 234.13

. Failure to comply wit h the reporting requirements in sections 234 .6 and 250.10 also

constitute violations of 49 U.S.C. § 41708. Violations of 14 CFR 234.13 also constitute

violation s of 49 U.S. C. § 41 721. Additionally, v iolations of Part 234, Part 250, Part 259, and Part 374, as well as 49 U.S.C. § § 41708 and 41721 , are unfair and deceptive practices in violation of 49 U.S.C. § 41712. This order directs United to cease and desist

from future similar violations and assesses a compromise civil penalty of $ 3 5 0 ,000 in connection with the refunding violations

.

Refund Requests Involving Airline Tickets

Regulation Z of the Board of Governors of the Federal Reserve System, 15 U.S.C. §§ 1601

- 1693r and 12 CFR Part 226 (Regulation Z) and the related Department of Transportation (Department) implementing rule, 14 CFR Part 374

, establishes that, with respect to refund requests involving airline tickets purchased with a credit card, a

credi tor

— here United

— must transmit a credit statement for a passenger refund to the credit card issuer within seven business days of receipt of full documentation for the refund requested. In addition, through its enforcement case precedent, the Department

req uires that, with respect to tickets purchased with cash or similar forms of payment , an airline must provide a refund within 20 business days of receipt of full documentation of– 2

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such a request. 1 Furthermore, pursuant to 14 CFR 259.5, a covered carrier mus t adopt and adhere to a customer service plan that includes a commitment to provide prompt

refunds when ticket refunds are due. Failure to process a refund within the stipulated time periods violates section 259.5 and Part 374 and constitutes an unfair an d deceptive practice and unfair method of competition in violation of 49 U.S.C. § 41712.

During an on

- site regulatory compliance inspection at United’s Chicago headquarters in August 2012, the Office of Aviation Enforcement and Proceedings (Enforcement O ffice) found substantial evidence indicating noncompliance with 14 CFR 259.5 and 14 CFR Part 374 by the carrier. Specifically, between March and May 2012, United failed to

process over 9,000 refun d requests in a timely manner. By failing to timely process refunds for air transportation, as required by Regulation Z and the Department’s enforcement case precedent, United violated 14 CFR Part 374 and engaged in an unfair and deceptive practice in violation of 49 U.S.C. § 41712.

Furthermore, pursuant t o 14 CFR 259.5, United adopted a c ustomer c ommitment and made it available on its website, www.united.com. In its c ustomer c ommitment, United pledge d that for purchases made with a credit card, it would submit the refund requests to

the credit card issuer within seven business days of receiving a complete request for refund, and for purchases made with cash, check, or other forms of payment, it would

issue the refund within 20 business days of receipt of the completed refund request

. United ’s failure to a dhere to th is commitment violates 14 CFR 259.5(b)(5) and Part 374

and 49 U.S.C. § 41712

.

Reporting Requirements

14 CFR 234.6 requires reporting carriers 2 to report monthly with the Department on a domestic system basis the total number of passengers enplaned systemwide, and the total

number of mishandled

- baggage reports filed with the carrier. 14 CFR 234.13 requires any air carriers that provide scheduled passenger air transportation to submit a report to the Aviation Consumer Protection Division on any incidents involving the loss, injury, or death of an animal during air transportation within 15 days of the end of the month during

which the incident occu rred. 14 CFR 250.10 requires reporting carriers to file quarterly reports with the Department’s Bureau of Transportation Statistics (BTS) listing, inter alia, the number of passengers denied boarding involuntarily and the number of passengers who voluntee red to give up their seats. These numbers are then published and made available to the public in the Department’s monthly Air Travel Consumer Report (ATCR), which ranks carriers according to their rate of mishandled

- baggage reports per

1 See Northwest Airlines, Inc. , Order 87

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- 33 ( November 16, 1987 )

.

2 Reporting carrier means an air carrier certificated under 49 U.S.C. § 41102 that accounted for at least one percent of domestic scheduled

- passenger revenues in the 12 months ending March 31 of each year.

14 CFR 234.2.– 3

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1,000 passengers 3 a nd their rate of involuntarily denied boardings. 4 ATCR data are used by members of the traveling public when choosing among transportation options and by carriers as a basis for advertising materials regarding the quality of their service compared to othe r carriers. Therefore, it is imperative that the ATCR data be accurate.

Violations of section s 234.6 and 250.10 also constitute violations of 49 U.S.C. § 41708, which authorizes the Department to require airlines to file reports in the for m prescribed by the Department, and violations of section 234.13 also constitute violations of 49 U.S.C. § 41721. Violations of sections 234.6 , 234.13, and 250.10 constitute an unfair and deceptive practice and unfair method of competition in violation of 49 U.S.C. § 41712

.

United disclosed to the Department that in 2011, it filed inaccurate mishandled baggage and oversales reports. Specifically, with respect to the mishandled baggage reports, United explained that between January and October 2 011, it underreported the number of mishandled baggage claims it received from passengers. Regarding the oversales reports, United revealed that in each quarter of 2011, it underreported the number of passengers who were voluntarily and involuntarily deni ed boarding on oversold flights and the total number of enplanements. As a result, United’s rankings in both areas in the ATCR were inflated. By filing with the Department inaccurate mishandled

- baggage and oversales reports, United violated 14 CFR 234.6, 14 CFR 250.10, and 49 U.S.C. § § 41708 and

41712

.

Additionally, in 2012 and 2013, United failed to submit a number of the reports of

incidents involvin g animals during air transport in a timely manner. By failing to timely

file reports on incidents involving the loss, injury, or death of an animal during air transportation, United violated 14 CFR 234.13 and 49 U.S.C. §§ 41712 and 41721

.

We note that United, on its own initiative, divulged its reporting errors to the Department

, and took proactive m easures to correct the reports and, in the case of the animals incident reports, to ensure timely reporting in the future

. Accordingly, although the carrier is directed by this order to cease and desist from future similar violations, no civil penalty is assessed for the reporting violations discussed above.

Mitigation

In mitigation, United states that it takes seriously its compliance obligations under Regulation Z and has dedicated the necessary resources for compliance. United explains

that the former United Air Lines, Inc.

, (“UAL”) and the former Continental Airlines, Inc.

, (“CAL”) transitioned to a single passenger service system, on March 3, 2012. United

3 A carrier’s rate of mishandled baggage is based on the total number of reports each carrier received from passengers concerning lost, damaged, delayed, or pilfered baggage and its domestic passenger enplanements over that period. Air Travel Consumer Rep ort, available at http://www.dot.gov/airconsumer

.

4 A carrier’s rate of involuntary denied boarding is computed using its total quarterly number of involuntary denied boardings and its passenger enplanements over that period. Air Travel Consumer

Re

port, available at http://www.dot.gov/airconsumer

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further explains that t his process required that all flights of UAL and CAL be marketed under a single airline designator code, that all reservations be housed in a single reservation system necessitating the migration of all UAL ticket transactions to that system, and that a single revenue accounting system be created . United notes that this migration was the largest undertaking of its kind in the history of the airline industry.

United states that i n connection with this process, it experienced an unanticipated back

log and a substantial increase in the number of r efund requests, managed by employees working with new systems and resulting in some unforeseeable anomalies that caused a temporary inability to process refunds in a timely manner.

The carrier states that t o address the refund back

- log and the increased n umber of refund requests, United invested significantly in overtime, temporary, and contract labor, providing extensive training on the joint accounting systems. United states further that it also implemented, on a temporary basis, a more expedited proces s of validating and approving certain refund claims to help to speed their processing.

Decision

The Enforcement Office has carefully considered the information provided by United

, but

continues to believe that e nforcement action is warranted. The Enfor cement Office and

United have reached a settlement of this matter in order to avoid litigation. Without admitting or denying the violations described above, United consents to the issuance of

this order to cease and desist from future similar violations o f 14 CFR 234.6

, 14 CFR

234 .13, 14 CFR 250.10

, 14 CFR 259.5(b)(5), 14 CFR Part 374, and 49 U.S.C. §§ 4170 8

, 41712, and 41721, and to the assessment of $ 350 ,000 in compromise of potential civil penalties otherwise due and payable pursuant to 49 U.S.C. § 46301.

This compromise assessment is appropriate considering the nature and extent of the

violations described herein and the size and sophistication of the carrier, and serves the public interest. It represents a strong deterrent to future similar unlaw ful practices by

United and other carriers

.

This order is issued under the authority contained in 49 CFR Part 1

.

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of this order as being in the public interest;

2. We find that United Airlines, Inc., violated 14 CFR Part 374 by failing to timely process refunds for air transportation purchased with credit cards, as required by the Consumer Credit Protection Act and Regulation Z of the Board of Governors

of the Federa l Reserve System, 15 U.S.C. §§ 1601

- 1693r and 12 CFR Part 226 ;– 5

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3. We find that by engaging in the conduct and violations described in ordering paragraph 2 , above, and by failing to process refunds for air transportation p aid

for with cash or similar forms of payment within 20 days of receipt of complete

documentation for such refunds

, United Airlines, Inc., engaged in an unfair and deceptive practice in violation of 49 U.S.C. § 41712 ;

4. We find that by engaging in the conduct described in paragraphs 2 and 3 , above, United Airlines, Inc., failed to adhere to its Customer Commitment in violation of 14 CFR 259.5(b)(5) and 49 U.S.C. § 41712 ;

5. We find that United Airlines, Inc., violated 14 CFR 234.6 by failing to submit

accurate mishandled

- bag gage reports;

6. We find that United Airlines, Inc., violated 14 CFR 234 .13 by failing to file

reports of incidents involvin g animals during air transport in a timely manner;

7. We find that United Airlines, Inc., violated 14 CFR 250.10 by failing to submit accurate reports of the number of passengers who were voluntarily and involuntarily denied boarding ;

8. We find that, by engaging in the conduct described in ordering paragraph s 5 through 7 , above, United Airlines, Inc., violated 49 U.S.C. § § 41708

, 41712 , and

41721 ;

9. We order United Airlines, Inc., its successors, its affiliates, its assigns, and all other entities owned by, controlled by, or under common ownership and control

with United Airlines, Inc., its successors, its affiliates, and its assigns to cease and

desist from further violations of 14 CFR 234.6, 14 CFR 234.13, 14 CFR 250.10, 14 CFR 259.5(b)(5), 14 CFR Part 374

, and 49 U.S.C. §§ 41708

, 41712 , and

41721 ;

10. We asses s United Airlines, Inc., a compromise civil penalty of $ 350,000 in lieu of civil penalties that might otherwise be assessed for the refund

- related violations

covered in ordering paragraphs 2 through 4 , above. Of this total penalty amount, $175,000 shall be due and payable within thirty (30) days of the date of this

issuance of this order. The remaining portion of the civil penalty amount, $ 175 ,000, shall become due and payable immediately if, within one year of the date of issuance of this order, United Airlines, Inc., violates this order’s cease and desist provisions or fails to comply with the order’s payment provisions, in which

case United Airlines, Inc., may be subject to additional enforcement action for

violation of this order ; and

11. We order United Airlines, Inc., to pay the penalty assessed in ordering paragraph 10, above, through Pay.gov to the account of the U.S. Treasury. Payments shall

be made in accordance with the instructions contained in the Attachment to this order. Failure to pay the pe nalty as ordered shall subject United Airlines, Inc., to the assessment of interest, penalty, and collection charges under the Debt– 6

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Collection Act and to further enforcement action for fa iling to comply with this

order.

This order will become a final ord er of the Department 10 days after its service date unless a timely petition for review is filed or the Department takes review on its own

motion.

BY:

SAMUEL PODBERESKY

Assistant General Counsel for Aviation Enforcement and Proceedings

An electronic version of this document is available at www.regulations.gov